A GUIDE TO YOUR PERSONAL INCOME TAX: AVOID AWFUL SURPRISES
Who loves to be surprised by the Internal Revenue Services? No one (unless it is a tax refund). The federal agency has its way of shocking taxpayers, in a good or bad way. How to deal with such surprises?
The first - and most important - thing to do is to prepare your tax return as soon as possible. You will not only ensure a not-so-stressful filing preparation and the accuracy of your documents, but the IRS will be given sufficient time to send back a tax return with a huge error before April 15. Many financial advisers or experts recommend submitting your return by the end of February. Also, no CPA will be available by April to check your papers since they are too busy looking into the returns of their clients.
Avert mistakes and wrong estimations. Taxpayers should do everything in their might to avoid incurring penalties and being jailed. Remember, the IRS can just reach out to any creditor to secure details about a person’s tax, his wages, and assets.
Here are the major penalty charges and its computations.
The agency gives the benefit of the doubt when they saw an error or discovered a mistake on the taxpayer’s return. There’s a 20% penalty for the undercomputed amount, which is levied immediately. Double-check your calculations before submitting your returns.
Failure to File
If you fail to beat the April 15 deadline, you can still submit your return even if you were not able to pay the amount due. There’s a 5% penalty for this infraction each month, which can increase by up to 25%.
Failure to Pay
Being one of the most lenient penalties, the agency recognizes taxpayers’ difficulty to pay their taxes. Still, the penalty is between 0.5% and 25% of the amount due penalty per month.
The IRS extends compassion to people who experience hardships in settling their taxes or filing their returns, but shows no mercy to those who submit deceiving returns. That translates to a 75% penalty of the undercalculated amount. Be dishonest in your taxes and you will see yourself staying in a jail cell for a long time.
If you owe more than what you can pay, bear in mind the IRS is understanding. You only need to tell them about your financial situation. Either set up installment payment plans for balances owed or find tax amnesty options.